A US judge ruled that Lloyd's syndicates of market members have no legal existence and cannot be sued. Under Lloyd's structure, such syndicates form the core of the market by underwriting insurance business. The ruling is the first in a series of suits brought by 91 members in the US against the London insurance market as part of the Roby vs Lloyd's proceedings. The plaintiffs, led by John Roby, allege breaches of US securities laws.

LONDON -- Lloyd's of London scored another victory in a legal battle with disgruntled investors, as a U.S. judge ruled that Lloyd's syndicates of market members have no legal existence and so can't be sued.

The ruling is the first in a series of suits brought by 91 members in the U.S. against the London insurance market. The proceedings, known as Roby vs. Lloyd's, are being handled for the plaintiffs by New York law firm Proskauer, Rose, Goetz & Mendelsohn.

Lloyd's has about 1,600 members in the U.S., out of a total of about 22,300 individuals who form the market's membership. The 91 plaintiffs, led by John Roby, a one-time candidate for membership in Lloyd's Council, allege breaches of U.S. securities and other laws arising out of their participation in loss-making Lloyd's syndicates.

Under Lloyd's structure, syndicates of market members form the effective core of the market by underwriting insurance business. The affairs of individual members are handled by members' agents, who place their clients in syndicates, while the syndicates are run by managing agents, who accept insurance business on behalf of syndicate members.

In recent years, many Lloyd's syndicates have run up heavy losses. Lloyd's accounts for 1989, due to be published this month under a system of accounting three years in arrears to give time for claims to come in, are expected to show a staggering #2 billion deficit ($3.7 billion), four times larger than previous record loss, set in 1988.

A number of disgruntled individuals in Britain and the U.S. have sued Lloyd's and their members' and managing agents to avoid having to pay for losses. But with the exception of an out-of-court settlement related to syndicates run by the Outhwaite managing agency, none has achieved any significant success.

In the Proskauer suit, the 91 plaintiffs named Lloyd's itself, its members' and managing agents and 318 Lloyd's syndicates of which they were members. But in a ruling this week, the U.S. district court in Manhattan dismissed the suit against the 318 syndicates on grounds that they have no legal existence under English law and so can't be sued.

Lloyd's principal defense is based on the fact that members sign a contractual agreement that any disputes arising from their membership should be heard in an English court. The U.S. federal judge upheld that position, said a lawyer at LeBoeuf, Lamb, Leiby & Macrae, the New York law firm acting for Lloyd's.

And though the other suits against Lloyd's itself and the members' and managing agents are still being heard, lawyers for Lloyd's said they are confident these suits would also be dismissed.

Credit: Staff Reporter of The Wall Street Journal